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Chile Pharmaceuticals and Healthcare Report Q4 2011
Business Monitor International, Oct 2011, Pages: 93
BMI View: Blessed with some of the world's largest reserves of natural resources, many of Latin America's major economies have long been reliant on commodity exports both to support domestic consumption and balance external accounts.
The growing discrepancy between the value of commodity exports and production volumes is leaving many South American economies (particularly Chile and its neighbour Peru), increasingly exposed to corrections in commodity prices. However, BMI believes the government will increase investment in the long term as it attempts to decrease bias towards extractive industries. It will also aim to develop the domestic manufacturing sector to ensure the region's long-term economic development.
Headline Expenditure Projections
Pharmaceuticals: CLP1,381bn (US$2.71bn) in 2010 to CLP1,449bn (US$3.12bn) in 2011; +5.0% in local currency terms and +15.0% in US dollar terms. Forecast up moderately from Q311 due to macroeconomic factors.
Healthcare: CLP8,320bn (US$16.33bn) in 2010 to CLP8,994bn (US$19.34bn) in 2011; +8.1% in local currency terms and +18.4% in US dollar terms. Forecast up slightly from Q311 due to macroeconomic factors.
Medical devices: CLP346.22bn (US$680mn) in 2010 to CLP374.42bn (US$805mn) in 2011; +8.1% in local currency terms and +18.5% in US dollar terms. Forecast marginally down from Q311 due to analyst modification.
Business Environment Rating
In Q411, BMI’s average Business Environment Rating (BER) for the 17 Americas markets surveyed has remained unchanged at 49.0. In addition, Chile’s composite pharmaceutical rating has also remained unchanged, standing at 55.2. In this quarter, the country continues to occupy eighth position in the Americas matrix. However, on a global basis, Chile has moved down one place to occupy 44th place in BMI’s global pharmaceutical rankings, and can now be found below Saudi Arabia and above Hungary. As a region, the Americas ranks second only behind Western Europe in terms of attractiveness to multinational pharmaceutical manufacturers.
Key Trends & Developments
Chile’s Ministry of Health and the Metropolitan regional government announced that an investment of CLP12bn (US$26mn) will be made in the healthcare sector. The investment will go towards improving the infrastructure of primary health centres located in 12 municipalities, and will be made over the course of 2011-2014.
The Ministry of Health also reported that there has been a 29% increase in the number of Chileans infected with the HIV virus in the last four years. The increase has seen the number of people infected with the disease rise from 18,552 to 24,019. According to Dr. Carlos Beltrán, an expert on HIV and AIDS from the University of Santiago’s School of Medicine, the rise in numbers has been credited to greater patient notification.
The Centre for Regenerative Medicine in the Clínica Las Condes is set to become Chile’s first stem cell laboratory. Although Chile has laboratories specialised in the extraction of stem cells, which are used to treat diseases such as leukaemia and multiple sclerosis, there are at present no laboratories capable of regenerating stem cells, which is a highly technical process. The new centre will begin extracting stem cells as of September 2011, with the cost estimated at US$6,000 per patient.
Domestic healthcare giant Cruz Blanca Salud announced that it had raised US$233mn through an Initial Public Offering in June 2011. The move follows a trend set by an increasing number of Chilean companies seeking to tap the equity market as an alternative to debt, especially in the light that benchmark interest rates have recently been raised in Chile. In June 2011, Chile’s central bank raised the level of base interest rates to 5.25%, with further increases expected in the coming months as the bank struggles to maintain Chile’s inflation rate at 3%.
According to a report published by the Directorate General of International Economic Relations, Chile invested over US$60bn in foreign countries over the last 21 years. Fellow South American countries have received the most capital investment, with Argentina topping the list.
BMI Economic View
Chile’s fiscal situation will remain very healthy as the withdrawal of stimulus spending is complemented by increasing revenues on the back of higher tax receipts and robust copper exports. BMI therefore retains a positive outlook regarding the trajectory of the Chilean economy, and forecasts real GDP growth of 5.92% in 2011 and 5.0% in 2012, with economic expansion set to be increasingly underpinned by private consumption. However, there is a risk of overheating and higher inflation. Nevertheless, BMI believes policy makers have recognised this threat and will continue to act to reduce the danger to longer-term economic growth.
BMI Political View
Over the next 12 months President Sebastián Piñera’s administration is expected to place renewed focus on the numerous economic reforms contained in his policy platform, which centres on bolstering the private sector and boosting foreign investment. The reforms will be central to Chile's long-term growth trajectory and as such the higher likelihood of their introduction in 2011 shores up BMI's positive near-term outlook for the economy. Policies most likely to be pursued are, in BMI's view, trade agreements and integration with key Asian economies, reforming the rigid Chilean labour market, and tax breaks designed to encourage foreign investment.
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